The Taxpayer Who Never Gets Credit: How South African Labour Finances Capital and the State

South Africa has become accustomed to a particular story about taxation: a small minority of formal taxpayers carries the country. This sends many poor on another manufactured guilt trip -courtesy of “democracy”. There may be truth in this story; but only half the truth. And. Then there may be a racial/racist undertone to the statement.

The more important question is not simply who is registered as a taxpayer. It is: who actually generates the income from which taxes are collected and who ultimately bears the tax burden?

Look at the South African economy from that perspective and a different picture emerges.

It is labour that goes to work every morning. It is labour that produces the goods, builds the houses, drives the trucks, cleans the hospitals, operates the mines, serves the restaurants, teaches the children, processes the transactions and keeps factories, farms, shops and offices functioning. And it is labour income that is taxed before the worker ever gets to decide what to do with it.

In 2024/25, South Africa collected R733.2 billion in net Personal Income Tax (PIT), making PIT the country's largest major tax category, accounting for 39.5% of net tax revenue. SARS itself says PIT is "primarily paid by working individuals." Company Income Tax, by comparison, generated R323.2 billion.

The contrast is striking:

Source: SARS 2025 Tax Statistics and SARS Annual Report. Shares calculated from the reported figures.

The first conclusion should therefore be obvious:

South Africa does not have a tax system financed only by companies and a tiny elite. It has an economy in which working people are a central fiscal resource. And the story becomes even more revealing when we look beneath Personal Income  Tax (PIT).

PAYE: the tax that leaves the worker before payday

The most important part of this story is PAYE , the Pay-As-You-Earn system.

In 2024/25, employees' tax collections were approximately R710.3 billion before the relevant credits/refunds, according to National Treasury's revenue tables.

This is not a theoretical tax. It is deducted from wages. It is collected from people because they have worked. It is money removed from the worker's income before that income becomes disposable income.That distinction matters.

Let’s simplify this. A corporation can talk about its "tax contribution" because CIT is visible as a corporate tax line. But the worker's tax contribution is often psychologically separated from the economic activity that generated it. PAYE becomes a government statistic rather than what it actually is: a direct claim on the economic value created through employment. Through workers. And the burden does not stop when the worker receives the remaining salary. The worker then enters the consumption economy. When that salary is spent on taxable goods and services, VAT is collected. When the worker buys petrol or diesel, fuel taxes are embedded in the price. When goods are imported, customs duties and import VAT feed into prices and ultimately into household expenditure. VAT alone produced R457.8 billion in net revenue in 2024/25.

For a household dependent on wages, consumption taxes are paid out of wages. The worker is taxed when income is earned and taxed again when that income is spent.

The poor worker's tax burden is bigger than the PAYE number

This is where the familiar argument about South Africa's "small tax base" becomes inadequate. Yes, the formal personal income-tax base is narrow. SARS reports that in the 2024 tax year 80.4% of individual taxpayers had taxable income below R500,000.

The question therefore needs to change from:

"How many people pay income tax?" to: "How much tax does the economy extract from the labour and consumption of working households?"

That is a much more revealing question.

And then there is the corporation

Now consider the company. The corporation's financial statements present wages and salaries as an expense. That makes perfect accounting sense. But there is an extraordinary economic irony hidden in that treatment. The worker appears on the company's books as a cost. The worker does not appear as a corresponding asset that creates the value and therefore the revenue stream. Yet without the worker, there is no production. Without production, there is no sales revenue. Without sales revenue, there is no operating surplus. Without operating surplus, there is no corporate profit. And without taxable corporate profit, there is no Corporate Income Tax.

The worker therefore occupies a strange position in capitalism: the worker is simultaneously treated as a cost to the enterprise and as a source of value to the enterprise.

The balance sheet does not say: "This company possesses R2 billion worth of human labour capacity." It records the machinery. The buildings. The intellectual property.

The financial assets. The inventory. But the people who make those assets productive are generally not recorded as assets. This is not an accounting mistake. Accounting standards are designed for particular purposes and human beings cannot simply be capitalised on a company's balance sheet. But economically, the omission is profound.

Labour is indispensable to the creation of the bottom line, even though labour is not itself displayed as an asset on the balance sheet. That is the point that gets lost when corporate tax is discussed in isolation.

Compare the tax paid by labour with Corporate Income Tax (CIT).

The numbers make the point starkly.

In 2024/25:

• PAYE was roughly R710 billion.
• Net PIT was R733.2 billion.
• Net CIT was R323.2 billion.

So PAYE alone was more than twice net CIT. And PIT was more than 2.2 times net CIT.

But even this comparison understates labour's economic contribution. CIT is a tax on profit after allowable expenses. Wages are one of those expenses. In other words, before a company reaches taxable profit, it has already paid workers to create the output that generates its revenue. The corporation is then taxed on what remains. That is why it is misleading to present corporate tax and labour taxation as though they are independent pillars of the economy. Labour helps create the taxable corporate surplus, while simultaneously generating PAYE revenue for the state.

'But only a small percentage of taxpayers carry the country'

This argument deserves a more careful answer. South Africa's tax base really is narrow. SARS data show that high-income taxpayers carry a disproportionate share of PIT. And this is not something to dismiss.

But the conclusion often drawn from this fact is too broad. The oft-quoted statement that "a small percentage of taxpayers carry the tax burden" can quietly become the statement that a small percentage ofSouth Africans carry the country's entire tax burden. Those are not the same proposition. A worker earning a modest salary may not contribute a large amount of PIT. But that worker does not live outside the tax system.

The poor worker may therefore be a small direct income-tax payer but a continuous participant in the tax system. That distinction matters enormously in a country where poverty and inequality remain so severe. 

The VAT problem: taxation does not end with the payslip

There is another reason the headline PIT figures can distort public understanding.

Income tax is highly visible. VAT is not. When SARS deducts R2,000 from a worker's salary, the worker can see the tax. When the worker spends R2,000 at the supermarket, the tax is embedded in the price, reducing the household's purchasing power. This is particularly important for poorer households because they tend to spend a much larger proportion of their income on consumption. A wealthy household can save a substantial portion of its income, invest it, acquire assets or generate capital income. A poor household is more likely to spend most of its income simply to survive. 

The great economic paradox

And this brings us to the even deeper problem. South Africa has built an economic system in which labour is indispensable to wealth creation but has relatively weak power over the distribution of that wealth. The employee creates value. The company captures revenue.

The company deducts costs. The company pays tax on its remaining profit. The shareholder receives dividends or enjoys capital appreciation. The executive receives remuneration.

The worker receives a wage.

And then the worker is told that the tax system is carried by a small group of taxpayers.

But where did the income that makes much of this system possible originate? From economic activity.And economic activity does not happen without people. Machines, mines, factories and hospitals cannot organise itself. Capital is productive because human beings make it productive. 

This is where South Africa's inequality problem becomes unavoidable

The argument is not that capitalism is inherently incapable of producing prosperity. Nor is it that corporations should not make profits. The argument is more uncomfortable: the way economic value is distributed matters as much as the amount of value produced.

South Africa produces substantial wealth, but the distribution of that wealth is extraordinarily unequal.

The OECD describes South Africa as having one of the highest measured levels of wealth and income inequality in the world. Its reported Gini coefficient for South Africa is vastly above the OECD average. (A 2026 analysis found State-owned enterprises top managers averaged about 14× the lowest-paid employees.)

This is not simply a story about poor people having too little money. It is about the structure of the economy. Who owns productive assets? Who controls capital?

Who has access to quality education? And then… And who remains dependent on wages? These questions take us beyond the conventional debate about whether the tax rate should be 26%, 27% or 28%.

A country cannot tax its way out of an unequal production system

South Africa's fiscal system does redistribute income. That must be acknowledged.

But there is a limit to redistribution after the economic structure has already produced an enormous inequality of income and opportunity. The government cannot permanently repair an unequal production system simply by taxing some incomes and transferring money to others. At some point, the distribution of productive capacity itself must change. Workers need better wages. Young people need access to productive employment. Poor households need access to quality education. Communities need functioning public transport, healthcare, schools, electricity and water. And South Africa needs a much broader ownership of productive assets.

Otherwise, the state is trapped in a cycle: capital produces concentrated wealth; the state taxes part of it; the state redistributes some of it; inequality remains; and the same economic structure reproduces the problem.

The balance sheet hides the worker. Society should not. There is something profoundly revealing about the way corporate accounting works. The machines, buildings, patents and investments are all assets. But the worker who makes all of them productive is an expense.

The worker is a producer. The worker creates the revenue from which wages, suppliers, interest, taxes, dividends and profits are ultimately paid. Without labour there is no "bottom line". There is only an idle factory, an empty mine, an unused computer system and a balance sheet full of assets that are not producing anything. The worker therefore deserves to be placed back at the centre of the economic story.

Not as a beneficiary. Not as a cost. Not as a statistic.

As a producer of value and as a contributor to the public purse.

The real tax debate South Africa should be having

We should stop asking only: "How many taxpayers are there?" Instead ask: "Who creates the taxable income?"

We should stop asking only: "How much CIT does business pay?" Instead ask: "How much value does labour create before the corporation arrives at taxable profit?"

We should stop celebrating the narrow group of formal taxpayers as though everyone else is economically invisible. And we should stop pretending that a worker's tax burden ends when PAYE is deducted.

The tragedy is that the people who contribute to this system often receive the least security from it.

They pay tax but may live far from quality schools; but may wait hours for public transport; but may depend on overcrowded clinics; but may live in communities without adequate sanitation; while their children face an education system that too often reproduces the inequality into which they were born.

This is the great contradiction of South African capitalism: the people whose labour keeps the economy moving can remain the people with the least power over the wealth that economy produces.

And that is why the debate about taxation must become a debate about economic power.

Because the question is not simply whether South Africans are paying enough tax.

The deeper question is: Who creates the wealth, who captures it, who is taxed on it, and who gets to decide what happens to it?

Until we answer those questions honestly, we will continue treating the symptoms of South Africa's inequality while leaving its economic architecture largely untouched.

Labour is not the footnote to the South African economy. Labour is the engine.

And if the engine is carrying the tax system, producing the profits and financing the consumption on which the economy depends, then it is time that the worker's contribution was counted not merely as a cost on a company's income statement, but as what it really is: the foundation upon which the bottom line is built.

* Shabodien Roomanay is the board Chairman of Muslim Views Publication, a founding member of the Salt River Heritage Society, and a trustee of the SA Foundation for Islamic Art. 

** The views expressed do not necessarily reflect the views of IOL.